Bank Negara Malaysia (BNM) has participated in an international project to successfully develop two prototypes for a common platform that allows international settlements using multiple central digital bank currencies (multi-CBDCs). Dubbed Project Dunbar, the effort saw a collaboration between BNM and three other central banks – the Reserve Bank of Australia, the Monetary Authority of Singapore, and the South African Reserve Bank – as well as the Bank for International Settlements (BIS) Innovation Hub.

In a statement, BNM said that this project sought to prove that financial institutions can use different CBDCs issued by participating central banks to conduct direct cross-border transactions on a shared platform. In turn, the platform will reduce reliance on intermediaries, allowing for cheaper, faster, and safer cross-border payments.

BNM also explained that the project had managed to identify several critical issues related to the implementation of a multi-CBDC platform. These include matters such as who should be allowed to hold and transact with CBDCs issued on the platform, as well as how to simplify the cross-border payments without compromising the regulations of each participating central bank.

“The project proposed practical solutions for addressing these issues, which were validated through the development of prototypes that demonstrated the technical viability of multi-CBDC shared platforms for international settlements,” BNM shared in its statement.

The assistant governor of BNM, Fraziali Ismail further said that Project Dunbar has offered meaningful insights into the potential of multi-CBDC platforms in resolving future cross-border payment issues. “The project [Project Dunbar] is a testament to the importance of central bank collaboration in supporting the development of next-generation payment infrastructures. We intend to carry these insights through other proofs of concept as we continue our CBDC exploration journey,” he said.

BNM had previously stated that it may begin experimenting with CBDCs in the next few years, in line with the rapid growth of the digital asset space in recent times. However, the central bank also stressed that it needs to be careful in these efforts as it does not want to just be “caught up in all the hype and buzz.”

Meanwhile, the head of the BIS Innovation Hub, Andrew McCormack commented that although a common platform is an efficient model for payments connectivity, it is also very challenging to achieve. “Project Dunbar demonstrated that key concerns of trust and shared control can be addressed through governance mechanisms enforced by robust technological means, laying the foundation for the development of future global and regional platforms,” he said.

To note, Project Dunbar began its trial in September 2021, and its current findings are expected to spur and inform future phases of the project.

(Sources: BNM, BIS)

• TAGS:
• Andrew McCormack
• Bank for International Settlements (BIS)
• Bank for International Settlements (BIS) Innovation Hub
• Bank Negara Malaysia
• BNM
• Central Bank Digital Currencies (CBDCs)
• Central Bank Digital Currency (CBDC)
• Fraziali Ismail
• Monetary Authority of Singapore
• Project Dunbar
• Reserve Bank of Australia
• South African Reserve Bank